State audit blasts Port of Seattle

A state audit released this morning blasts the Port of Seattle for lax management of construction projects, citing a host of failings that have wasted taxpayer money and left the Port "vulnerable to fraud, waste and abuse."

The report found that the Port frequently has circumvented public bidding requirements in violation of its own policies, and sometimes in violation of state law.

In one instance, Port management authorized a contract related to construction of the third runway at Seattle-Tacoma International Airport that was $32.7 million higher than an engineer's original estimate. That contract violated state law and details of it were concealed from the elected Port Commission, according to the performance audit released by State Auditor Brian Sonntag.

One consulting agreement awarded in 1998 was increased, without competitive bidding, from $10 million to more than $120 million. Sonntag said the contract has unnecessarily cost taxpayers $60.5 million.

Auditors also raised the specter of favoritism in some no-bid Port contracts, saying it was a "distinct possibility" that bidding requirements were ignored to steer contracts to "favored vendors."

The audit criticizes the Port for stonewalling the investigation, citing instances in which staff blocked or delayed access to information and altered documents before releasing them to auditors.

In some cases, the Port divided jobs into multiple $50,000 contracts, or awarded contracts for that amount and then amended them to higher amounts later to avoid triggering competitive bidding requirements, the audit said.

Eleven Port managers refused to provide signed written statements attesting to the accuracy of all the information they provided to the auditors. Such statements, which are usually routine in audits, included language saying the managers had "no knowledge of any allegations of fraud or suspected fraud" in the Port's construction contracts.

In all, Sonntag said his office found $97.2 million in "unnecessary costs" at the Port, and made 51 recommendations that he said could help the Port avoid waste in the future. Among the key recommendations, Sonntag said the Port should hire a chief procurement officer to oversee all contracts.

At a morning news conference, Port CEO Tay Yoshitani said while he disagrees with some of the audit's findings, the Port will implement most of its reccommendations.

"It is a new day and it is a moment of change," said Yoshitani, who started at the Port this year. "We see it as a great opportunity to look at what we do and how we do it."

Port Commission President John Creighton and Commissioner Lloyd Hara echoed that sentiment at the news conference, while noting the Port already has taken steps to address problems cited by the audit.

They also stressed that the Port is a large, complex organization that has managed billions of dollars in construction projects in recent years, from the third runway to a new cruise ship terminal.

Yoshitani said no one at the Port had been fired over the audit findings. He characterized most of the problems as unintentional mistakes.

"I have no reason to believe that any of our people have purposely abused the system or lied or anything like that," Yoshitani said.

However, he said the Port had hired an outside firm to further investigate at least some of the audit's findings.

The performance audit covered all construction projects and related consulting agreements at the Port from January 2004 through March 2007, though some of the contracts had started years earlier.

Washington voters gave the State Auditor's Office authority to perform independent performance audits when they approved the Tim Eyman-sponsored Initiative 900 two years ago.

The audit continues the recent wave of bad publicity for the Port. It follows a flap over the attempts by former Port chief Mic Dinsmore — Yoshitani's predecessor — to negotiate a sweetened severance package, and revelations that Port police sent sexually explicit e-mails.

Those controversies helped lead to the ouster of two Port Commission incumbents, Alec Fisken and Bob Edwards, in the Nov. 6 election.

Jim Brunner: 206-515-5628 or jbrunner@seattletimes.com